What is the Government National Mortgage Association?

The Government National Mortgage Association (Ginnie Mae) is a government-owned agency in the United States that provides liquidity for financing government mortgage loans and also ensures that borrowers repay the principal and interest of mortgage-backed securities in good time. GNMA is an acronym used for Ginnie Mae. Ginnie Mae, was established in the United States in 1968 as an arm of the Housing and Urban Development (HUD). The goal of Ginnie Mae is to increase the number of homeowners in the US through the provision of housing finance for individuals. With the liquidity provided by Ginnie Mae, it gives first-time homemakers, low-income borrowers, and other underserved groups access to government-sponsored mortgages in the mortgage market.

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How Does Ginnie Mae Work?

The provisions of Ginnie Mae facilitate the issuance of loans to homeowners who do not qualify for a mortgage in the traditional marketplace. The Federal Housing Administration (FHA) insures mortgage-backed securities issued by approved Ginnie Mae lenders. This means such lenders are reassured of repayment. Given this assurance, lenders are encouraged to make more mortgage loans at lower costs, thereby expanding the number of homeowners in the United States. Since the mission of Ginnie Mae is to expand housing finance in the US, this government agency ensures that mortgage lenders have access to funds with which they can make more loans to customers. Ginnie Mae also facilitates global capitalization that aid the issuance of mortgage-backed securities that are insured by the FHA. It is important to know that Ginnie Mae as a government core does not issue MBSs or purchase mortgage loans by itself, rather, all transactions pertaining to the trade of MBSs are undertaken by private lending institutions as approved by Ginnie Mae.

Ginnie Mae vs. the Other Maes and Freddie Mac

There are some other corporations that may function and sound like Ginnie Mae but they are different from Ginnie Mae. Freddie Mac, Sallie Mae and Fannie Mae are corporations that are commonly confused for Ginnie Mae. While Ginnie is a government-owned corporation, all others are not owned by the Federal government but are sponsored by the government. Despite that these corporations are government-sponsored, they are run by private individuals. Also, the mortgage-backed securities approved by Ginnie Mae are insured by the Federal Housing Administration (FHA) and the Veterans Administration (VA), while this is not so for other relative Mac and Maes.